U.S. Declines to Prosecute Metals Firm : Business: Processor of scrap has paid $8 million in restitution to clients since Daniel Hernandez’s fraud case sparked inquiry.

The U.S. attorney’s office said Friday that it has closed its investigation into allegations by convicted defrauder and former Orange County socialite Daniel Hernandez that a scrap metal recovery firm where he worked skimmed as much as $250 million in precious metals from its customers.

In declining to prosecute, the U.S. attorney in Santa Ana cited the fact that PGP Industries in Santa Fe Springs has paid nearly $8 million in restitution to clients and has instituted new policies to inform customers fully of its assaying procedures.

The company, a subsidiary of Gerald Metals in Stamford, Conn., issued a statement Friday saying it “cooperated fully in the government’s investigation and was confident of its outcome.”

Prosecutors had conducted a two-year investigation into allegations by Hernandez, a former PGP sales representative, and others that the company systematically ripped off customers. Hernandez made the accusations after he was accused of absconding with nearly $8 million to finance his lavish lifestyle.

Hernandez, who attended numerous high-profile parties and charity events, poured the illegally obtained money into such private perks as a five-bedroom Mission Viejo home, shopping sprees in Italy and 15 automobiles, including a Rolls-Royce and Ferrari Testarossa.

The 42-year-old businessman is appealing his nearly six-year federal sentence for money laundering and fraud. His wife, Susie, was convicted and sentenced to 16 months in prison for her role in the crime.

Assistant U.S. Atty. Stephen Wolfe said Friday that the investigation has drawn to a close, but he declined to comment further.

In a letter, dated Monday, sent to PGP’s attorneys, Wolfe said the decision not to prosecute was based on “all of the evidence developed to date.” That included the company’s restitution to customers and its promise to tell them about how it evaluates the precious metal content of scrap metal.

PGP is one of a handful of companies that reclaim precious metals from scrap sent to them by other companies. PGP is supposed to test scrap for its platinum and other metals and pay the customer for its value.

Instead, the company was being investigated on allegations that it reported to customers lower levels of precious metal content than its lab results showed and that it misled them about how those tests were performed.

The company’s former controller, James E. Moroney, said he told federal authorities last year that the company was engaging in evaluations in which the “results told the customer were lower than the real . . . results from the PGP analytical lab.” Moroney said PGP had engaged in the “unethical” practice of “skimming platinum and rhodium from certain metal products.”

After the practices came to light in the wake of the Hernandez investigation, some of PGP’s customers demanded reimbursement based on the correct laboratory assay.

In the company’s statement Friday, Gerald Metals President Gerald Lennard said that, after the Hernandez embezzlement came to light, “PGP made certain that its customers were familiar with its business practices” and that it made restitution for Hernandez’s thefts “and to resolve any other commercial disputes.”